Ep312 Clyde Bernstein, Placement Tech Leader Aon: Get the plumbing right

0:02I'm Mark Geoghegan and you're listening to the Voice of Insurance podcast, produced in association with Advantage Go, now part of Sapiens. Pick and choose your own best of breed insurtech and data providers with the Sapiens Advantage Go ecosystem. Most episodes of this podcast deal with the here and now, the day-to-day cut and thrust of what's going on in the market. This podcast is completely different because it gives us a view into the future of broking. Clyde Bernstein is the placement technology and trading analytics leader at Aon. And in the first half of this podcast, we examine the global broker's new digital placement exchange, DPX, placing system, designed to automate the placing of following lines.

0:46Once that essential building block of the conversation is out of the way, the interview really begins to take off. What Aon is in the middle of doing is removing friction and costs from the placing process, while fully connecting all its brokers with the whole global market, and all the insights the vast amount of risk and market data it has at its disposal can afford. Exploring the logical, medium and long-term consequences for the market is the really interesting part of our discussion. The transformation is profound. A market with far greater liquidity, access to deeper pools of capital, and an ability to trade risk much faster and more efficiently is what emerges.

1:24Productivity, customer service and product innovation should also surge. The role of the broker could also change fundamentally. But the best thing about this conversation is not the clarity of the blue sky thinking on display, but rather the fact that the person shaping the vision is resolutely a broker and not a technologist. In his long career, Clyde has brokered claims, reinsurance and specialty risks. He's one of us, a lifelong broker who has learnt to engage with cutting-edge technology and not the other way around. This means that our discussion is always grounded from the perspective of the real life of a broker solving client problems, and not the utopian vision of a technologist who has never placed a risk or paid a claim.

2:07It's mind-expanding stuff and one of the best discussions on the future of broking I've ever recorded. I highly recommend a listen. Enjoy the podcast. Clyde, welcome back to The Voice of Insurance. It's really great to see you again. Thanks, Mark. Lovely to be with you. For anybody out there who's listening who doesn't know you, you've been in the London market for a very long time. And I think anyone who's walked down Lime Street would have seen you once or twice, I'm sure. I always had that feeling when I met you. You're someone whose face I actually already recognised, which is a funny thing.

2:37So why don't you just quickly run us through your career to date and how you got to where you are? Well, Mark, I've been in the industry for 35 years. I joined straight from school. Didn't really enjoy school very much. I was going to become a chef, but I managed to get into Willis in Ipswich. So I started to do some extracurricular activity. And I moved from Ipswich to London, and I started placing claims in the London market. A little bit later, I went to Succommon into Madrid. I wanted to learn Spanish. And our chief broking officer at the time said to me, you should go over there and learn that skill.

3:06So I spent four months overseas, came back. That was the catalyst to placement. And I became a placing broker on the international property stage. I did that for many, many years, but lost a bit of my mojo and wanted to learn again. And I joined our reinsurance colleagues on the treaty side. And I looked after one of our major treaty clients in Willis on the reinsurance side of the business. And I wasn't prepared to give whatever, 10 years of my life to earn the stripes on the sleeve for the Japanese. But it was an incredibly good experience because I learned the importance of client service, responsiveness, and execution quality.

3:38It just happened at the time that our deputy CEO, Steve Hearn, had a crisis in the business, which was about we just lost 30 people, 35 people from our fine art jewelry and specie business. So it's quite an elegant way of getting out of reinsurance and coming to help the firm rebuild that capability. And again, it's unusual in an organization where you typically inherit when you take on a job, somebody else's work, and you put your own spin and slant on things. But largely, the fabric is already tailored. But that was quite an experience because you could think about your go-to-market strategy, what your broking execution role was, and also very much about how you're going to serve clients.

4:12Did that for a little while. And then ultimately, I got to become the chief broking officer at Willis on the UK specialty and retail business in the UK. It's probably the second biggest territory outside of North America. And I made a big part of my role, how are we going to compete in the market of the future? And that was very much about starting to think about an industry that will at some point go through change and ensure that we are ready and not a statistics of people that didn't see the writing on the wall when that digitisation arrived. And that's what you've been doing over here. And you've been at Aon for how long now?

4:45Been here for three years. Can you just explain why I think everyone knows you a bit? Because you've been everywhere and done almost everything. Of course, we have that Spanish affinity. I had no idea, Clyde, so we can do the rest of the podcast in Spanish now if you want. I don't know about that. Many, many years since I've practised it. So we're really here to talk about what caught my eye and the reason why we've got this podcast organised is Aon Digital Placement Exchange. This has been your sort of life's work for the last few years. DPX, I'm glad that we've got a nice three-letter abbreviation which we can use from now on.

5:13So it's that this is what we need to do to be the broker of the future and not be some footnote in a history book about insurance. So tell us all about it. How do you get the idea off the ground? How do you make it work? So this has really marked the culmination of about three years of work. We as a company took a decision back in November 23 to invest about a billion dollars across the transformation of Aon and the entirety of the way that we show up to clients and our colleagues. And that's investments in our analytics capabilities, investments in our broking and advisory roles, and equally the way that we service customers post-bind.

5:47And one of the things that we've been working on is a thing called Aon Broker Copilot, which is really a strategy about being fit for the future, ensuring that we can execute the broking strategy of the company with discipline and ensuring that during the transaction we unlock one of the largest risk intelligence in the world it's called a ons trading data and when you think about a process that's a consistent go-to-market strategy where you've got access to a very rich form of intelligence about client buying habits pricing commerciality in the market etc carrier performance responsiveness all the things that pass our desk every single day in the world in analog but without actually having the formulaic approach to structuring that data.

6:26Once you've got your ability to have a consistent go-to-market proposition, and you've also got trading data, it allows you to think about now how would you connect risk to capital in a faster, more efficient way. And connectivity is not just about an algorithmic play. It's about how does our retail office work with our wholesale office, so our network organizations around the world? How do they come to London in that specialty hub, that area of thought leadership and innovation, to work as one to solve client problems. So we're doing a lot of work around now having laid foundations of building Aon Broker Copilot, thinking now about actually the next stage of trading risk in a faster, more efficient way.

7:11So tell us about the copilot. Is that every Aon Broker in the world, when they log on to their system, has he got a copilot there? And then having done that, does it then say, oh do you want to send this to DPX or I've already sent it to DPX and this is what they've said. So we're starting to lay the foundations really for the organisation to have awareness of where the very best solutions reside in the firm. So if a retail office is looking at a prospect and thinking about the divergence between their local market and London for example, they have the intelligence at their fingertips to suggest that actually yeah you could do it down the road with your mate domestically.

7:47But equally, there might be a more creative alternative solution elsewhere. And when you've got the plumbing right, where actually there's a common platform, the same platform being used by our North American brokers compared to our European brokers, you can start to remove the inefficiencies and the frictional aspects that prevent local offices from utilising somebody overseas. Because often it's cumbersome, It takes time. There's inaccuracy with the data. The reconciliations don't work, or it takes us three weeks to go back to them and respond. And what we're starting to do now is make sure that we publish and advertise London as not only that centre of excellence, but also a service-orientated organisation or centre that can deliver responsiveness to our retailers, that can take out the cost of trading in the London market, which is a prohibitor to progress.

8:40I always remember, you know, the classic moments, oh yeah, but that's below a minimum premium. And it's kind of like, it's gone in the bin and it's sort of, oh, okay, well, I have to have a word with my local guys then. Yeah. That creates a little bit of anti-selection. And if you think about London, London historically did really, really well in the hard market because the business would flow in. But actually, how do you ensure that you still have that quality of portfolio in London, irrespective of market cycle? Well, the first thing you need to do is make sure that London is just an extension of that retail play.

9:10And when they are an extension of retail play, which means they respond quickly, they are as competitive as the indigenous markets, and also you're truly working as one to find the very best solutions from the global capital pool, then you have a mechanism to do some really clever things. That's really interesting. So you'd say that Aon's there now in terms of everybody being on the same page, on the same system, everyone with visibility through and connectivity to everybody else within Aon. We haven't got the global connectivity yet. We're in the process of rolling out. We've gone live in the US.

9:40We're moving to Europe. So the critical mass is there, and then it's just getting around to connecting up the final bits. Correct. Before we move on, co-pilot, I suppose everyone's seen the co-pilot. I imagine it is something that's sort of sitting there in dialogue with you as you are going about your daily business. And it's sort of saying, hey, what are you doing? Can I help you? That kind of thing. And it's saying, hey, should I do this? Should I do that? Have you thought about this? Have you sent this to that? This is the pricing in D &O in that territory right now. Do you want me to do something about that?

10:11Is that how it works? It's almost like a chatbot. I'm just trying to give the feel for someone to imagine what it would look like if it was on their screen. If you could imagine a broker system, we have in the past, multitude of ways of preparing a risk to market, sending it out. Could be email, it could be PowerPoint, Excel, and that brings a whole load of inconsistency and complication. What we've done with Aon Broker Copilot, and just for clarity, it is not an AI tool, it's not a Microsoft tool, it's proprietary technology that we've built, and it becomes the mechanism by which our brokers prepare the submission to the market, taking on risk information, effectively selling the risk to carriers, the distribution of that risk, distribution is quite prevalent and relevant to CPX, and then obviously the negotiation with the carriers, the analysis of those quotes that come back, and then ultimately the recommendation to the customer, and the point to bind.

10:59And in one platform, that's what our brokers are using. That's Aon Broker Copilot. But when we start to distribute the risk and we start to think about how we're going to find the very best terms from the global marketplace, you get into broking. And we're not telling brokers what to do. What we're starting to do now is give them a common platform where the intelligence of the company, that trading data is at their fingertips, so they can actually make data informed decisions about markets, things that would have taken them three months to find out about is now available in the platform. And increasingly, that is going to be used to adjudicate, evaluate markets, and look at actually who are performing at the very highest levels for our customers.

11:42And when we have that type of decision-making process instilled in a platform, we start to execute a broking strategy consistently, but we truly do find the very, very best carriers for our clients' business. This is obviously sort of qualitative as well as quantitative. Presumably it's talking about the coverages. Often one of the other reasons people come to London is because you can get a cover that you can't get locally. So that's all part of the conversation. Yeah, correct. Because let's take a classic product or facility. A lot of time is built curating it. There's a lot of work between the carrier, the wordings expert, the broker, to try and address a market problem.

12:18And eventually you get something off the ground, if you can get over the fact that maybe there's no historical pricing or there's no historical claims activity, especially on emerging risk. And you build this thing called best of class. Theoretically, it should be better than what's on the shelf. But how do you ensure that that actually gets completely used all of the time? It actually has the flow. It executes on its promise. And that becomes a marketing thing, which is the same broker is also the person that writes the flyer, who's the sort of person that's going to take it around the world and sell it.

12:47Well, when you're in a common platform now, and you truly do have what is considered to be the very best solution available to a client. The moment the client's risk profile starts to align to these types of solutions that are available, they're broadcast, they're advertised. And of course, it's a brave retailer that ignores this thing that might sit in a different region, in a different territory, that truly is the very best solution for their client's business. That's great. So let's get more specific about DPX itself. How does it work? At least, What's the main sort of architecture and structure of how it works?

13:23When we took the decision to transform the firm, we simplified the company. And one of the first things we did was we effectively built risk capital and human capital. We simplified the organizational structure. And that allowed us to work much more closely with capabilities and skills that sit other parts of the organization. And one of those skills is our strategic technology group. These are people that advise insurers around capital management, pricing, business strategy, etc. And we ask them to say, look, at the point where we secure lead terms, do we want to continue to pound the streets having 10 different conversations, possibly causing more risk to the firm because you worry about the data integrity and the quality?

14:04But also that hugely inefficient process of repeating and getting somebody else to mark the homework of someone that the client's happy with. So we asked them to help us build a model, and we call it an algorithmic model, where the carriers retain their ability to set their appetite, to express their view of risk. And increasingly, view of risk becomes far, far broader in today's world with the availability of data. If you think about what used to happen is a broker knew everything or the insured knew everything about the risk. Today, an insurer can know everything about the risk. It's available on the ether.

14:40So when you start to think about your attitudes to risk selection, actually the parameters that you might now use to consider a risk and differentiate between one risk and another is quite broad. So we built a model that gives an underwriter flexibility to express their appetite and change that appetite as and when they need to do so. And then Aon Broker Copilot as the submission engine, which is a way of getting a client's risk from Aon into a carrier. We send that submission to the model and we get a response in seconds from following markets. But the unique thing about it is that the carriers are keeping their pen.

15:21They're not delegating their authority away completely. Yes, they have to accept that this is the lead price that they're being offered and the terms and conditions with it. But the model is flexible enough for them to really take a view on whether they'd like the risk. Is it adequately priced according to their own aspirations? Does it have the risk characteristics, the construction, the protection, the engineering qualities that actually is going to allow them to go long on that risk or short? and that hybrid model of retaining authority where you can flex your line size based on characteristics is quite unique and we're quite proud of that.

15:58When you're building something like this, I suppose, is there a moment where you have to say, we have to streamline some parts of this. We can't accommodate every whim and every little nuance that every underwriter in the world has. If you go to every underwriter, they might have one or two things that are slightly different from every other underwriter. When you're building a system, would it make it too unwieldy to try and accommodate all of them? So there has to come a point, presumably, where you have to streamline things and say, well, yeah, I know you've got that little whim where you want to know what colour the door is.

16:25And you seem to think that it's pertinent to the risk, but no one else does. So at some point for them, if they sign up to DPW, do you find that they have to make some kind of compromise? They have to accept there is a certain amount of streamlining? So the day one model that we took to market is, I'd say, highly, highly flexible. And not one carrier across the many that we've discussed have questioned the fidelity of that model. So it does effectively replicate what their underwriters do today. So it's well thought through in design. So it's good enough of a palette they can sort of blend the colours exactly the way they want them.

16:57Correct. But what I would expect over time is as analytics improves and awareness about correlations of things that influence performance, profitability, changing landscapes in industry sectors, etc. Root cause analysis on claims. when you start to take feeds from that availability of insight, people are going to have a slightly different view. They've seen something in the tea leaves different to another underwriter. And that's how you outcompete. That's how you start to make money when other people are pulling back, but you can still stay in and show that continuity of capital. So this model will evolve, but on day one, it was broad enough not to get into that impediment where you can't accelerate its rollout because you're trying to beat all things to all people.

17:42And what's in scope for the system at the moment? And how many markets have you got signed up? We've got a lot of markets. You'll see some press releases come out over the next few months. But we're starting with our US national property business. It's a highly capital intensive line of business. It starts in the US because it aligns to Aon Broker Copilot risk submission. So we can ensure that the model has a high degree of fidelity in terms of risk data, is supported by this structured risk submission that we're building in our retail environment in the US on Copilot. So we start there. But of course, this becomes, to my point about a consistency of go-to-market proposition.

18:21If our broking strategy is to deliver responsive service to our clients to return the benefit of investments in technology to customers so they have a better experience at a lower cost of trade. This becomes the mechanism by which we're going to place our following market business. So as we have open market opportunity where we're syndicating the risk, we should ensure that we're using the routes that are highly efficient, responsive, and also are sustainable, sustainable business models that are going to allow London to have a role in the future. So it sounds like the world's your oyster as everything gets connected in a couple of years time when you're fully connected to say every single Aon broker anywhere on earth is connected to this and is also connected to DPX.

19:08Is it right to say that the scope could be anything that Aon Brokes? Perhaps the other way of looking at it is what's obviously out of scope? So out of scope on day one, there are going to be some risk classes that are at the moment just quite gritty. And to your point earlier about, are we going to spend too long trying to customise the solution and then not get to scale and acceleration? You could see that. Yeah, because property is big enough. You can see that in casualty, for example. At the moment, some of the challenges around casualty as a class, it might not be quite conducive to doing algorithmic trading on day one.

19:40But our product lines are broad. If we look at what we place in the London market, and Aon Client Treaty is a good example of that, it's a multi-class tracker in every line of business that we handle in the London market. But we also place business in the open market with those same lines of business. So you can see this thing move beyond property into cyber and D &O and the other lines that is traditional. And what sort of expectations do you have about how much business flow you're going to get through the system? I guess we'll probably go through this learning curve. I touched earlier that we're highly sensitive to the change.

20:15This is a people business with a lot of knowledge in this industry. And we're not telling people what to do. this algorithmic trading in terms of follow market capacity does not dictate which markets to use. It surfaces options to our brokers where there's choice. You have a risk like this, and there are various pools of capital that are available to you to place that risk. The brokers like they do today, they choose and they select and they allocate orders depending on their knowledge of the client's needs, their industry expertise, et cetera. So when we think about the next evolution of this particular product, I think we're going to get to a point where it will evolve and it will start to start thinking about, okay, how could it be used differently?

20:58So for example, an algorithmic follow model could become equally your expression of interest. So when you think about an RFP, where you don't know much about the customer or about the market's tolerance of a client like that, you could use some of this sort of early expression of interest. It will test some of the philosophy around the annual venture of renewals, where we wait for the expiry date and we sort of renew the policy for another 12 months. Well, this becomes like a live barometer of is there still continuity of capital available for this portfolio of business? It could also be almost a sales tool as well, a production tool to say you've got a non-Aon client and you can go to them and say, you do know that this is where the market is right now.

21:42This is what you could be having. Are you interested? I mean, you probably don't know what cover they're buying and on what terms, but you might have a rough idea and you say, you know, the market's moved. Time to jump over to Aon, you know, press three buttons. But certainly I've heard of the technology being used as a production tool. That's also a possibility. Yeah, you can use it in many different ways. And the sure bet in this world of pace of change is that if you try and predict the future, you're probably wrong. So I know that it opens up so many different opportunities to challenge the status quo, to rethink things.

22:12And the thing about technology is that there's no good putting a new tech onto old process. So when you start to think about some of the things that the market is doing now, you probably need to reimagine what you've historically done. And AI plays a key part in that. They sort of level the playing field for many, many markets, people that possibly weren't at the races on technology. Well, they've just been given this injection, this fillip of opportunity to get their house in order. So everybody else is level now, but that will then create really positive competition because it generates creativity and it starts to get people to think about what is the art of the possible if we were to reimagine this industry.

22:52Obviously, there's no market if the carriers aren't ready. What kind of conversations are you having? Is it naturally the portfolio solutions people within those organisations? Because most of them have one now and they're doing quite a lot of business already. Is that the way in with those businesses or are you talking the highest level? as a strategic thing to get those people in? We've gone in at the underwriting level because a lot of the business today is still managed by the line underwriter. And there's different approaches from each carrier. We've seen sometimes it's a portfolio solutions team.

23:21Other times it's the case underwriter. But actually bringing those two teams together because they're going to have to work together in this new world. And yeah, you might start taking case level underwriting and it starts to become much more of a portfolio strategic set where actually one or two people are setting and implementing the strategy of the underwriting teams. But if you don't get in the formation stage, the build and the buy-in, just like you need the change and the buy-in of the brokers to adopt technology, the science of broking, you're probably on the wrong footing. So it's a mixture.

23:55There's some that are more advanced and have already established, as you say, portfolio solutions teams and take on naturally that growing remit. But there's others that are still working out how to do this and to take the best minds from effectively portfolio reinsurance type teams alongside the case underwriters you probably get a better product yeah because it's not just always a question of just going straight to the cuo then because there's individual underwriters got to see the benefit in terms of for them obviously there's a cost i presume you charge them to come on the platform obviously they have a cost because they've got to spend time integrating and spend time on it cost for example but is there an explicit charge there's a small setup fee.

24:33And I'll tell you why it's a setup fee, because what we're doing as a company is as we move from analog to digital, one of the things we're leading and we're very proud of is that the client must see a benefit from the investment in technology and a lower cost of trade. So taking that old concept of a new toy and then charging for it, well, you probably could. And the market and the headwinds or the tailwinds are in our favor, but actually we're being a bit more sophisticated in that. We're actually re-evaluating how we create value in the world of digital, and we will come to market at the right time.

25:06And we'll talk about the proposition, which will be a combined proposition around algorithmic, digital trading, analytics, and access to global clients in a far more sophisticated way than trying to sell our mother to clinch the deal. And culturally, it sounds like, and certainly when I talk over the last couple of years, particularly the way that Portfolio Solutions has really developed. Certainly the feel is that culturally most underisers, most carriers in the London market, if they're not ready now, they want to be ready. And maybe if it was 20 years ago, they might say, well, what's this all about?

25:39I don't need to do this. I'll just stick to what I'm doing. Whereas these days, it seems like there has been a culture change. There's a massive shift. We as an industry look at Blueprint and ask questions whether it worked or didn't work. But I think the one thing it did do is it got people's act together, got them talking about, thinking about what are they going to do. And of course, now people are starting to move the envelope a little bit quicker because they couldn't wait for the market to modernise. But that's been a good thing because it's starting to raise boats. And this industry, I think for the first time, is going to get it right.

26:09There's going to be some bruises and some scrapes along the way. But actually, more than ever in the past, and we've been talking about this, Mark, for some time, this is happening now. I remember in 1992, my desk didn't have a computer on it. And then by 1993, a computer appeared on my desk, and it had Brokershaw on it. And Brokershaw was actually a spinoff of Heath. So I think at the time, Brokershaw actually still belonged to Heath. For anyone over 45 might remember Heath, but used to be an important broker. I think what was left of it ended up in Gallagher back in the day, a long time ago, all ancient history.

26:44But the point there is, that was technology that Heath had developed, because we've got a lot of broking to do. We want to make it more efficient, we want to do it by computer, you know, BrokerShare is a reasonable system, green screen. But then they saw, actually, we don't need to own this. We don't want to own this as a proprietary advantage. Just, they'd say, Heath have got this great advantage over all these other brokers because we've got this really good system. They actually said, you know what, we should probably spin this off. We should sell this to other brokers. We shouldn't see it as a competitive advantage.

27:09What's your view of what you've been building? Sounds like it's the other way around, that you want to keep this as a particularly proprietary Aon thing. So at the moment, it is. It's the way that we're going to trade with markets and connect risk to capital in different ways. I suspect when we look at actually the partners that have maturity, they will have their own house in order and they'll be able to connect together in very seamless ways. There might be others out there that maybe just don't have the wherewithal or the ability to invest in the way that we've invested. We'll talk about that when it comes about, but at the moment, this is our strategy.

27:43This is how Aon is going to distribute risk on its client's behalf to drive outcomes. And that's the way we're approaching it. I suppose this is one of the unique things about being large enough that it can just be yours because you're big enough to make things viable because you're Aon. You're big enough to actually to keep things in-house without having to sort of subsidize it by sending any of your competitors, for example. You said never say never because things like the IP on these types of licenses, actually, who's to say that actually that becomes more valuable over time than some of the other traditional companies?

28:14platforms of broking. They're sort of things, again, to that point earlier, never say never, and you can't predict the future. But at the moment, we're focused on what we're doing for our customers, and we'll see what happens in the future. This is the meat in the real question here now. This is sort of your vision for what the future of the market is going to look like. So, I mean, how is it going to be? I mean, you've already got the A &M Client Treaty. I'm just imagining this broker, you've got this lead line, you've got A &M Client Treaty again, which is the sort of ballast that 30 % is already placed.

28:43You've got a lead line, whatever that is, you know, 10, 15, 20. And so you've only got 50 % to place. Is everything else going to be DPX? Will we tend to a moment where lead line, and it's effectively leader only because there's own client treaty behind, and then immediately following is all the DPX capacity. Is that the way it's going to be, do you think? Well, we haven't specified allocations of percentages that are being placed in a particular way. But that concept of finding the very best leaders for your client's business, applying your best of class facility, and then finding follow market capacity at a touch of a button quickly and smartly, that is sound.

29:24That drives your broking strategy. I suspect when we think about access to capital, when it's really, really easy to test the globe and to get a decision in seconds from following markets, we're going to have challenges around things like oversubscription. So how do you deal with now you've got a certain amount of capacity in different funds? You could imagine the broker starts to become much more of a fund manager in that respect and starting to become like a buy side analyst, which looks at the counterparty risk across those platforms and starts to think about how do I preserve continuity of capital?

30:00So that's a change of mindset because before it was like drive and drive and drive the lowest common denominator. Problem with that, it might work for you today. But when you come to renewal and you've got a problem with your client, you look quite silly. So we want to drive continuity of capital. So the brokers are going to have to start thinking about how to allocate the shares and show that actually they have the awareness to ensure that there is an ability to preserve the Aon Client Treaty when it's looking a little bit underweight. or allocating some more funds to the hybrid, not the tracker, but the active investing element of Smart Follow, because that's the way the cycle is going.

30:41And if we don't start to do that, we're going to have, again, egg on our face. So brokers, I think, are going to start to really start having to think quite carefully about they've got pools of capital, they've got a client need, how do they optimize the very best solution for the customer today, but ensure that our trading with those capital providers are there for tomorrow. And of course, that leader, the way things are, you can, of course, organise that capital in the front end, in the placing end, or of course, that lead line might come back, they might offer you 100%. Not to say that that's all them, but that's their consortium, that there's some formal consortium that they've got already stacked up following behind.

31:22Again, so anything you can digitise, they can also digitise. And in the end, it might end up going to the same pools of capital, just fronted by slightly different means. I suppose, does that really matter? So it matters because people are emotive about - If they disappear tomorrow, of course, then it does matter. Yeah. Some people think that's our role is to do the syndication of the risk. And then when consortiums come about, it's like, well, don't we do that? I'd look at it and say, actually, the leader's proposition, the leader's going to have to have subscribers now. They're going to have people that like them because their proposition, unless they have the ability to do 100%, they're going to have to have a following.

31:57And that following can now vote with their feet quite quickly. And that knowledge about how they're voting with their feet is instant on something like an algorithmic response system. So the leader's proposition is going to be now based on what they offer the customer. They're aware with all about the sector and their ability to transcend risk and to have a claims proposition that stands up. But equally, if they want to be the one that is chosen. They better be the one that's also supported quick access to capital. And the likes and the subscribers that are backing them actually have quite a powerful voice now.

32:32Because if a broker wants to simplify the syndication of risk, that's not just about the placement process. It's also about how many counterparties do you have on the cover note. So when you have a lead market that could possibly put out 100%, it's a far simpler solution than having 10 agreement parties. Yeah, but it's more vulnerable from a competitive point of view and also from a continuity point of view to say if that underwriter falls over or just suddenly loses that appetite, says, right, I'm not doing this anymore in the middle of that year because I've had a bad year, then that is your problem.

33:04And that needn't have been your problem if you placed it, including two alternative leaders who were there who probably quoted and missed out on being the lead, but you kept them on board and they had a watching line or something. but I suppose then it's far easier to manage all of that now with clicks of buttons etc and a few couple of phone calls. Easy to manage and also you start to see the potential to churn to your point there about is this carrier vulnerable is it going to cause our clients a problem in 12 months time that doesn't just happen overnight it actually is something that typically you see in their changing response.

33:38Yeah you kind of hear whispers about it as well and the data informs you. Yeah yeah. So you can start to choreograph a strategy with a customer that 12 months out is starting to think about how do we hedge a little bit of protection against possibly what this carrier might do to us in 12 months time it sounds like ai could be a good thing there also to say hey mark i love the way you've constructed this placement apart from have you thought what about sustainability obviously you've easily got the best terms it's about 30 cheaper the client's gonna be over the moon but then strategically is this the right thing to do given that that market you've just placed it with, we know that they're not 100%.

34:15They're not at the moment, you know, and we're a bit worried about them. What about an alternative probably end up costing 10 % more or something, but it's going to have security built in because it's going to have two alternative leads also on the placement. What do you think about that? And let's explain that to a client as well, because they might not get it. Well, I'm glad you raised that because actually... Because that's a great thing that AI could do, because it can think strategically in that sort of sense. Yes, it can. And we've talked for years about selling on value as opposed to price.

34:40And one One of the things that you start to enable when you've got really clever intelligence to interact with is you can start to engage the customer far more consultatively. So that interaction about what do you value and what are your trade-offs and how do you think about actually if you were to take a higher retention or you were to spread the risk over five carriers, not 10, what does that look like? And that type of interaction with the customer where you've got technology to support the access to markets and the real-time implications of those sorts of thesis and those simulations starts to really drive value in the organization of our customers because they've never seen that before.

35:19They just see this situation where they employ a broker and the broker goes off 120 days and then returns an answer. And in most cases, it's consistent with what you shook the hands with. But a lot of times things can happen in the marketplace or you just don't get the sort of response that you thought you were going to get. And by having now client-facing technology that brings together real-time analytics and also a connected platform that allows you to shift strategy to rebalance the portfolio and the funds is going to be a mechanism by which clients really see the value that we bring as an industry.

35:54And we struggled to sell that for years. What do you think the long-term consequences are going to be for all of this, you know, maybe in 10 years time when this is fully in scope and you could place almost anything you know someone sitting in london could end up writing the homeowner's business i mean we've just come through the 10-year anniversary of hiscox flood plus and it was really most interesting part of the presentation was a moment where they were just sort of dialing in a zip code for a house somewhere and the flood premium was a hundred dollars and i was thinking that's just not what lloyd syndicates used to do and they were saying yeah and now everything else has got apis and And that's not even the most sophisticated application of technology today.

36:32It's actually fairly static, as well as I could see. But in terms of getting that ticket price down, it sounds, for me, I'm very bullish about this being an incredibly positive thing for the London market. The London market is going to get access to write all sorts of things that would never have been shown before. So it's competing on the global stage, firstly, because if it doesn't have a cost issue, it suddenly does compete on an apples for apples basis. And if it has connectivity and the big organisations are starting to join their firms, so they have a consistent go-to-market strategy and they're going to enforce that through the rails of their broking systems, then you are competing on the global stage, which opens up a whole portfolio of business that possibly you didn't see in the past.

37:08But if I fast forward many years, we think about the protection gap and the fact that we have to ensure that traditional capacity lasts its test of time, which means actually that true partnership of making sure that you're price proximate, you're giving the clients the very best deal, but equally you're going to be around for tomorrow. We have to preserve the traditional capital, but we also have to introduce new forms of capital because there's enormous volatility and risk and complexity of risk and unmet needs and everything that we see about the difference between covered and uncovered perils.

37:38And when we think about that, the only way to source that new form of capital is to go into alternative forms of capital, to bring in the pension funds, the head funds, people that want access to risk, but probably looked at this industry in quite an antiquated fashion. the liquidity of how do I enter and exit the market elegantly? How do I ensure there's a buyer on the other side of the line at any day of the year for me to say, do you know what? I'm moving my asset base from this class to this class. And when you think about just the buckets of capital, whether it's trackers, passive investing, active investing with smart follow, et cetera, then actually you're starting to give the mechanisms for capital markets to have transparency of pricing, access to liquidity, and also access to this alternative investment class that starts to look a bit more like financial services.

38:33We have to provide those rails in order to bring new forms of capital to support this industry that desperately needs, or there's a growth play, if we can actually multiply the size of the price. Could it become a sort of Goldman Sachs, though, in that sense, starting to warehouse some of this risk to provide that liquidity? I'm sure there's lots of people thinking about those sorts of things. Yeah, because you're holding most of the cards. You've got all the clear understanding of where the risk is, what price it's being charged. You know everything about it. And also you're able to aggregate it into interesting pools that are wonderfully diversified.

39:09Again, obviously you've already got client treaty, for example. So again, of course, that is officially structured as an MGA. Again, could you be managing some of that capital yourselves? Who knows? I think that's probably beyond a pay grade though, isn't it, Clyde, at that point? But I don't want to get in any trouble. No, no trouble at all. What about efficiency? There must be a cost-benefit analysis sitting somewhere. You work for a large corporation. You don't just sign off on a billion dollars. If it's not going to save you many X that. What sort of efficiency in your trials as business is beginning to flow through the system that you're starting to get?

39:42We Aon Broker Copilot, the whole business case. And I had a lot of questions from people internally about actually what are the cost benefit analysis, what's the efficiency, the savings, etc. Firstly, this is not a bums on seat exercise. We're not trying to reduce the number of brokers. This was very much a growth play. If we can perform at a higher level, optimize client outcomes, advise them in a different way, we will start to see that in the numbers through growth retention. because our proposition alongside everything else we're investing in as a firm starts to contribute to the experience of the customer.

40:16So this is a growth play, not an efficiency play. But when we think about the multiple times that we are duplicating work, and I'll give you an example. When we think about a risk submission that comes through Ambroker Copilot, let's take the schedule of values. That schedule of values is the asset that is going to be used to perform the catastrophe modelling. And that catastrophe modelling has to be performed before you can start to do the pricing of the risk. And every single carrier is performing exactly the same exercise for a property risk. And they're all going to find at least 10 mistakes in this huge list.

40:52Spot on. And they're all offshoring it. And they're all delaying their underwriting activity by two days, waiting for the response of that cat modelling exercise. If Aon is doing that as part of it's analyser service where we start to quantify exposure or clients exposure to risk and model loss. Why are we not taking that process that's highly effective using similar models to what the market uses and say as a service that just becomes available to you? Now that is an example of efficiency of taking away duplicative effort and process. It will reduce costs unquestionably, but we have to look at all of those examples and there's many, many more.

41:32And suppose you're taking on a tiny bit more E &O. That's the only other thing. But for efficiency, it's really interesting. So you're going to get the efficiency gains by being able to do five times as much. It's not necessarily cheaper this way. Well, it probably is cheaper, but I haven't focused on that. It's not the point. So the idea is, how do we get to grow our business five times? And then this is going to help us do it. And then, of course, if you do that, it's going to be more efficient. And if you're using the tools wisely and you've got that concept of technology taking away the lifting, the monotonous activities that detract from ideation, creativity, spending more time with clients, servicing markets, whatever, then you're going to get to a point where you're going to do more with the same group of people.

42:13You're going to free them up for the things that actually is not fun, but actually get them back into focusing on the things that they didn't have the time to focus on. Of course, there's going to be another whole class of people who are the people who don't spend time with clients who can spend time with the data and say, hey guys, I've noticed something that in East Virginia or whatever, there's a massive gap in the market. And now I can see it because I've got this A on data. I can see everything. And that'll be another interesting thing. And those are the people who then tell the people who do get in front of the clients, here's a new idea.

42:40Why don't you explore this business idea? Because I think there's a massive amount of premium that we could get in here. It could be really, and also it would be very profitable for the underwriters that like it, et cetera. And it will serve a need that is not being served. So again, you get all of that. So you've got all the different skill sets. It sounds like you're still going to need a good broker who can sit in front of a client and actually explain to all this complicated stuff. Yes, you do. And there's more options to talk through now. Correct. And especially in this complex risk arena.

43:05This is not a touch of the button exercise. There's a lot of consulting that takes place, a lot of handholding. They're not the experts. They're coming increasingly to this sector, this professional services industry, to help guide and take them on that journey. And the feedback that we get is people want recommendations. They don't just want options and let the client decide. They want us to come forward and make recommendations. So that whole process of how we get to the equation and the recommendation is very much that interaction, that consultative approach with the customer throughout every stage of the risk transfer process.

43:41In the press release that accompanied the launch of DPX a few weeks ago, you mentioned about investing in solutions for the whole Aon client journey. So for example, things that are absolutely qualitative and not quantitative, things like claims, you know, claims responsiveness and claims quality, the quality of service on the claims side from carriers. Can you build this into that experience? Again, when that broker's sitting down with these people to say, you know what, this structure, I know it's a bit more expensive, but it's also in terms of quality of claims servicing that we understand and the sort of insights we get from those carriers and that willingness to pay is better this way.

44:18Is that another thing that you're going to want to build in? So Mark, I had a town hall last week with our claims team. This is a team that are now looking after the implementation of Aon Claims Copilot. Similar thing, a global rollout for the way that we manage. Because you were a claims broker back in the day. I was indeed. Yeah, that's where I started. And I said to them, I started the presentation with, I actually genuinely, I'm quite excited, not corporately excited. I'm excited by what we're doing in claims because for the first time, we're about to put claims on the same footing as placement.

44:48And what I mean by that is if you think about claims, it's the promise to pay, it's the product that we sell. But historically, it's been an afterthought. It's not the sexy part of where people want to work and they want to be in underwriting or broking. And claims is considered to be not as proficient as that. And I think actually, if you think now about what we're selling, we're selling a promise to pay a claim. So when you take claims trading data, the equivalent of what they see day in, day out from negotiations of losses, the types of causation, root cause analysis, inflationary trends on rebuilding and what cost of the Strait of Hormuz is doing to commodity supplies or supply chain and how that's manifesting now in average claims trends, etc.

45:31That is critically important as an input into this product that we're giving the customer called a policy? And if those two are not connected, how can you ensure that the policy is fit for purpose? So if we are now building our placement technology and our claims technology on the same architecture and they can speak to one another, they become incredibly important inputs into actually how we get a market in terms of preparing the coverage in the first place to ensure it responds to what's happening in the world, but also to ensure that when we make decisions or recommendations to our clients, yeah, price is always important.

46:09Coverage is always important. But so are some of those softer measures about what we're seeing in the willingness to pay a claim, not the ability. The ability is about the financial wherewithal, the S &P rating, et cetera. But response times, how often does a carrier reach for legal counsel, duration of payment, numbers of questions asked, how quickly do you instruct legal counsel or adjusting expertise? They can be quite important factors in starting to think about, does this carrier have claims, the willingness to pay, and the promise to pay in their DNA themselves? You'll see it in the metrics.

46:45You'll see it in the way that they serve customers, perform, and execute. Because the good companies that perform in there, a client will tell 10 of their mates to go and buy from them, and it's a client for life. Not many people get that. And also, just from a broking perspective, of course, when you come to those renewals, I always remember old school, this is pen and paper renewals. there was always uh you know hey it's two months to go for renewal and um have these claims that are on my board row here have they been notified to the market yet because i'm going to start talking to they're not going to be very happy if their own claims department doesn't know about these things i'm about to show the lead underwriter and it was always that little scramble it's like yeah um actually getting around to it right now it's you know derrick's in a very long queue to see that person and of course these days one would hope that that's just all been done it's all been done digitally and everyone's fully aware of where we are on everything.

47:34What about AI in general? We've been talking about AI obliquely here in terms of some of its possible applications, but in terms of what you've been able to use it for so far, what have been the best use cases? So we'll take a quote, for example, that comes into the organisation and we'll use AI to effectively extract the data from that quote. So it's straight into our database and it's ready to be analysed and presented to the broker in terms of things like quote comparisons, for example. So there's a good symbol there. And I think in the insurance market, the equivalent on the underwriting side would be how do you get a risk submission, ingest that risk submission, classify the documents that are being supplied.

48:10The AI is supporting things like routing of whether this customer should be looked at first versus the next one, as well as some more sophisticated sort of analysis around propensity to buy. And so there's some use cases coming together here. What we're doing is we're using it on our quote ingestion, but we're also starting to use it now, the agentic AI is around how do we surface intelligence in a much more fluid way throughout the workflow. So as our brokers are carrying out activity about preparing submissions, sending that out to market, et cetera, you can have the agents supporting the workflow, the orchestration of information, starting to actually do those things in a different way.

48:47The final piece is on the build. If we want to build the next product or we want to take Aon Broker Co-Pilot to the next level is these days, those AI tools are starting to speed up the traditional time to build and to code and the quality and the effectiveness of that coding, and then the quality of the testing. So you can start to really accelerate speed to market. And if you think about this industry that got a bit of a bad rap for lack of innovation, AI is a catalyst for really driving speed and shift in the quality of the solutions that we think about the maturity, the modernisation of this industry.

49:25And it's a game changer. I'll have to leave for another podcast. The rest of the London plumbing, I know we've had a bit of a hiatus with Blueprint 2. And part of the narrative around that was actually things moving so fast that we probably will end up building the system was already five years out of date by the time we implement it. But having talked to you, it sounds absolutely plausible that it probably is right to be slightly pausing or just moving not with some sort of grand vision, because it sounds like it's going to be difficult to know what that vision is because things are going to be more organic and things are going to be far more sort of darwinian because things are moving fast but that'll be for another complete podcast because i know i've had you on the podcast talking about that kind of thing like because it was around the data council wasn't it you were representative on that i'll leave that for another one until then clyde this is really interesting because things are moving so fast and we have to catch up quite quickly particularly when the whole things in scope and the world really is sort of visible to everybody else, that'll be the really exciting moment when things will just spark, I think, and things will just take on a life of their own and we'll just be here observing.

50:26Thanks a lot. Mark, it's always great to be here. Well, I hope you enjoyed today's episode. If you did, don't forget to subscribe or leave a like or a review or recommendation on whatever podcast platform you used to access this program. These really help get the word out. Before we go, just a quick reminder that advertising slots are available here and in other places in The Voice of Insurance podcasts. Podcasting is the fastest growing medium and attracts a high quality audience of key decision makers. It's also an intimate medium where you, the listener, are right in the room with me and the interview subjects.

51:00Needless to say, that means it's a great way of getting your message out directly to an audience because you know you've got their full attention. It's also very cost effective. So get in touch with mark at thevoiceofinsurance.com to find out how you could be speaking directly to the industry. The Voice of Insurance is produced in association with Advantage Go. Release your underwriters to underwrite with Advantage Go's underwriting platform.

51:30Voice of Insurance is produced by me, Mark Gagan. Music was written by Anna Gagan and produced by Carlos Gagan. Check out more podcasts and written comment pieces at www.thevoiceofinsurance.com.